Explanatory Statement
Social Security Exempt Lump Sum (Dependant Pension Lump Sum Payment and Closure) (FaHCSIA) Determination 2009
Summary
Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs to determine that an amount received by a person is an exempt lump sum for the purposes of the social security income test. The effect of this Determination is that, for a person or a person’s partner who is in receipt of the dependant pension, the receipt of a one-off lump sum payment made as a result of the cancellation of ongoing payment of the said pension is an exempt lump sum.
Background
Under the social security law, all income earned, derived or received for a person’s own use or benefit, is generally assessable as income. However, some amounts, that would otherwise be income, are specifically exempted from the social security income test. Paragraph 8(11)(d) of the Act allows the Secretary to determine that an amount, or class of amounts, is an “exempt lump sum” for the purposes of the Act. An exempt lump sum is excluded from the definition of “ordinary income” under subsection 8(1) of the Act. As a result, any such amount is not to be taken into account under the social security income test.
The dependant pension is a form of pension paid under the Repatriation Act 1920 which, prior to 6 June 1985, was granted to the wife or dependent child of a veteran to compensate those dependents for the possible effects of the veteran’s war-caused disablement.
Upon the introduction of the Veterans’ Entitlements Act 1986, the transitional provisions allowed those in receipt of the dependant pension to voluntarily cease receiving their pension and receive a lump sum equivalent to three years of payment. This was not taken up by all recipients. There have been no new grants of the dependant pension since 6 June 1985. Those dependents who were in receipt of payment on 5 June 1985 had their rate of payment frozen at the rate payable on that date for so long as they continued to be entitled to the pension. This allowance has little value in today’s economy and so a lump sum payment is being made in lieu of ceasing the ongoing fortnightly payment.
The effect of the attached instrument is that people who are in receipt of dependant pension will not have any social security payment reduced because of receiving a one-off lump sum payment as a result of the cancellation of ongoing fortnightly payment of their dependant pension. This is because the lump sum payment will not be regarded as income for the purposes of the income test under the Act. The one–off lump sum payment will equal the total amount of dependant pension the client would have received over the next three years, to be paid on 24 September 2009.
Explanation of Provisions
Part 1
Section 1 of the Determination states the name of the Determination and shows how it is to be cited.
Section 2 states that the Determination commences on the 24 September 2009.
Section 3 contains definition provisions.
Part 2
Section 4 provides that where a person who receives a one-off dependant pension lump sum payment, in consideration of cancelling their fortnightly dependant pension payments, then this one-off lump sum will be an exempt lump sum in respect of that person for the purposes of the Act.
Consultation
The Department has consulted with the Department of Veterans’ Affairs (DVA) regarding this exemption. DVA has confirmed that it will exempt this one-off lump sum payment from the Veterans’ Entitlements income test as a result of the cancellation of ongoing fortnightly payment of the dependant pension paid by DVA. We have also consulted with the Department of Education Employment Workplace Relations with respect to this payment.
Regulatory Impact Analysis
This Determination does not require a Regulatory Impact Statement or Business Cost Calculator Figure. The Determination is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact.